Our INTERVIEW OF THE WEEK this week is with one of the most successful Founder-CEOs in the history of the online industry: Reed Hastings of Netflix.

In the past decade, Reed has built Netflix from a little DVD-by-mail company into an international behemoth with a $12 billion market cap that is disrupting the traditional TV distribution business.

Along the way, Netflix's surging stock price has made fools (and paupers) of no end of skeptics.

What's next for Netflix? Will the skeptics finally be right? Or will the company's second decade be even more impressive than its first?

SAI's Dan Frommer and Henry Blodget spent a half-hour on the phone with Reed last week discussing the following topics...

The size of Netflix's market opportunity (bigger than you think)

"Personalized" Netflix accounts (one for every person in the family)

The competition

Why Netflix isn't offering pay-per-view

Whether Netflix will offer "tiered" streaming prices

Whether content companies will screw Netflix in the next round of negotiations

Whether the cable cos will try to crush Netflix by enacting bandwidth caps

The three key aspects of Netflix's culture that have helped it become such a success

Whether Reed will be running Netflix for the next 10 years

And more...

Enjoy!

(And thanks to Business Insider's Ellis Hamburger for transcribing the call.)

Henry Blodget: Welcome, Reed! Thanks for doing this. Ten years ago, I remember when Netflix was originally thinking of going public, you were a tiny DVD-by-mail business, and everybody smart I talked to said there’s no chance in hell this thing ever works. Here we are ten years later, 20 million subscribers, two billion in revenue, 12 billion dollar market cap. Where do you think you’ll be ten years from now?

Reed Hastings: Well sticking with ten years ago, we couldn’t even get a meeting with you. (Laughs) Anyway, where are we in ten years? I don’t know, I couldn’t have predicted where we are from then.

BI: So it’s bigger than you thought it might’ve been?

RH: Oh, bigger and different. We were back in 2001. We were not yet profitable. We were growing on DVD and wondering how things will work. There are a lot of differences.

BI: Well, let's look forward 10 years. Do you think you’ll still be running the company?

RH: Ten years is always too long to make any useful prediction.

BI: But that’s your ambition? You’re not ready to hang up the skates?

RH: I can certainly say that I’m not thinking of retirement this year, but ten years for anyone, it can depend on so many things.

BI: Okay, let's talk about your market opportunity. You have 20 million subscribers now, approximately, in the United States, and there are something like 115 million households now. When you think about the total market opportunity domestically, what should people think is a reasonable number of subscribers that services like Netflix ultimately will have?

Google FinanceNFLX stock price.

RH: The way we look at it is on the upper bound, we do it by mobile phone subscriptions, the number of people in the United States that pay for a mobile phone. That cuts out very young kids, people with zero income, and that number is about 300 million.

BI: Our household only has one Netflix subscription. We currently pay you a lot more than eight dollars per month, but I don’t envision a scenario where my wife has one account and I have one account and each of my kids have an account, so you really think that that’s a reasonable way of looking at it?

RH: No, that's the upper bound. So the upper bound, if it was natural for each family member to have a separate subscription, like you each have a separate Facebook account, if it becomes so personalized video that you do want it individualized, than that would be the upper bound. Another way of looking at the market is the number of households that can subscribe to cable or satellite, and that number is about 100 million.

BI: Do you think that you ultimately will start offering personalized accounts? That’s an interesting idea that I hadn’t heard before.

RH: It’s quite personalized now, but not in a way that’s so compelling that you never want to say “I don’t want to use my kid’s account.” The question is, over time, can we make Netflix so personalized that as the kids get to be teenagers and they get their own Facebook account and their own mobile phone, that they also get their own Netflix account?

BI: Do you think that that’s likely?

RH: No, it’s a possibility. It’s an aspiration.

BI: So, as you think about it, do you think the 100 million number is the right market-opportunity number that people should think about, or should it be a 200-300 million type number?

RH: Well 100 million is another upper bound, and that assumes, in this case, that every single cable or satellite household subscribes to Netflix, so both of those are available market figures. As to how they get split between Netflix and its competitors, that’s really hard to tell. Somewhere north of 20 million, south of 300 million.

Silicon Alley Insider

BI: What percentage of the 20 million now have cancelled cable or other TV?

RH: Everyone, essentially, on Netflix has a TV service and also 30% of them have HBO, which is the national average.

BI: So right now, it’s definitely not an either/or, in fact it’s just how many more services can you pile on top of your existing cable service?

RH: Yes, that’s right. We’re like one more cable network. We’ve grown from in the last three years, the number of streaming accounts in the US from zero to 20 million, and MVPD (multi-channel video programming distributor) is basically steady, so last year, total MVPD in the US went down slightly, or the first three quarters of the year, but that was largely due to the recession. And then in Q4, total MVPD households went back up. And if Netflix were a substitute, you would see MVPD going down like landlines have, or something like that, which you don’t see.

BI: We already talked about one possible way that you could get more money per household, which is personalized accounts. Do you think that with streaming, you will ultimately have tiers, the same way that you do with DVDs. Like I get a basic selection for $8, but if I pay $15 I get twice as much stuff, or I get cooler, different stuff. Or if I pay $50, I get everything?

RH: We don’t have any plans for that. We want to focus on a simple proposition: unlimited streaming for $7.99 per month. Our big focus is taking that simple proposition around the globe. We started with Canada seven months ago, we’ve been super successful there, we’re targeting to surpass 1 million subscribers this summer. Less than one year from launch in Canada. That’s been so successful that we’re now expanding to other countries.